That is the amount of cash Apple’s CFO Peter Oppenheimer is sitting on. With yields on Treasury bonds at an all-time low, Apple is not earning much on its treasure trove, but what do you do with all this cash?
- Buy someone?
- Pay it out to investors through dividends?
- Buy back stock?
Not many CFOs have the problem on that grand scale right now, but Oppenheimer is hardly alone: my friend Jerry wrote a couple of weeks ago this interesting post about U.S. companies holding nearly $2 trillion of cash, up 25% from a year ago. Just to put things in perspective, 25% is $500bn, which almost equals the amount of the fiscal stimulus plan issued by the U.S. Government at the onset of the crisis at end 2008. It is probably a superficial analysis, but it feels like the 700 billions of taxpayer’s money made its way into corporate treasuries, but it did not create the economic stimulus it was supposed to provide; in other words, it fattened profits and bolstered balance sheet, but did not do much for the real economy.
It has been noted that CFOs like to move in packs, and if some of them start hoarding cash, all others will follow suit – for no real good reason except everyone else is doing that and analysts may start to think lots of cash is highly desirable and bid up the stock.
Even if public companies do not heed Jerry’s jobs creation scheme, IMHO there is no doubt that siphoning off trillions from the system only to park it in corporate coffers will not help the economy in the long run. Even giving it to Banks would be better (and THAT is saying a lot) !
Do I hear someone muttering “idle cash tax” somewhere?